BiggerPockets Real Estate Podcast

871: BiggerNews: Why the Crash Predictors Are Wrong About a Foreclosure “Crisis” w/Rick Sharga

Jan 12, 2024

Rick Sharga, CEO of CJ Patrick Company, discusses the current state of foreclosures, the three levels of foreclosure, and his 2024 foreclosure prediction. The podcast also explores trends in loan delinquencies, the potential impact of foreclosures on the housing market, and strategies for successful real estate investing.

48:34

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Episode guests

Rick Sharga

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Quick takeaways

Foreclosure rates are currently low, with only 0.4% of loans in foreclosure, mainly due to government interventions during the pandemic.

Equity plays a significant role in foreclosure rates, with about 80% of borrowers having at least 20% equity in their properties, providing a cushion that allows them to avoid significant losses through foreclosure auctions.

Deep dives

Foreclosure Rates and Historical Activity

Historically, foreclosure rates in the mortgage industry have been around 1-1.5% of loans, with delinquent but not yet in foreclosure loans at about 4%. During the Great Recession, foreclosures spiked to around 4%, mainly due to reckless real estate speculation and lender misconduct. Currently, foreclosure rates are lower, with only about 0.4% of loans in foreclosure. The government's foreclosure moratorium and mortgage forbearance program during the COVID-19 pandemic contributed to the low levels of foreclosure activity. However, there has been a slight increase in foreclosure starts recently, although the number of properties being auctioned off in foreclosure sales and bank repossessions remains lower than pre-pandemic levels.

Introduction

3min

The Current State of Foreclosure Activity and Implications for Real Estate Investors

21min

Trends in Loan Delinquencies and the Impact of Equity Awareness

3min

Foreclosure Trends and the Potential Impact on the Housing Market

3min

Analyzing Real Estate Market and Foreclosure Activity

4min

Strategies for Successful Real Estate Investing

7min

Everyone keeps talking about an incoming surge of home foreclosures. Over the past few years, online crash predictors shouted from the rooftops about how another foreclosure crisis is always on the way, and we’re only months from a full-on meltdown. How much of this is true, and how much of it is pure clickbait? We’ve got Rick Sharga, Founder and CEO of CJ Patrick Company, one of the world’s leading housing market intelligence and advisory firms, on the show to tell us what the data points to.

Ever since the pause on foreclosures during the pandemic, homeowners have been getting win after win. They were able to save up plenty of cash, their home values skyrocketed, and they could refinance at the lowest mortgage rates on record. Now, with high rates, still high home prices, and steady demand, homeowners have most of the power, EVEN if they’re behind on payments. But, as the economy starts to soften, could the tapped-out consumer finally force some homeowners to default on their loans?

In this BiggerNews episode, Rick will give us all the details on today’s current foreclosure landscape, walk us through the three levels of foreclosures, give his 2024 foreclosure prediction, and share the economic indicators to watch that could signal a coming foreclosure crisis.

In This Episode We Cover:

A 2024 update on foreclosure rates, defaults, and Rick’s foreclosure forecast for next year

The three levels of foreclosure and why most homes WON’T ever be defaulted on

Rising consumer debt and what happens as more Americans default on their credit card and auto loans

Housing supply and whether or not a foreclosure crisis could finally give us some inventory

Economic indicators to watch that could signal a rise in foreclosures

How to use your home equity to invest in real estate (WITHOUT putting yourself at too much risk!)

And So Much More!

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